Thursday, 24 September 2015 12:57

Strong focus cash and costs drive profits up

Written by 
Theo Spierings, Fonterra chief executive. Theo Spierings, Fonterra chief executive.

Fonterra chief executive, Theo Spierings, says improved second half results in the 2015 financial year were driven by a strong focus on cash and costs.

"We focused on improving our sales mix, achieving more efficiencies; maximising our gross margins and achieving our strategic goals faster.

"Our efforts contributed to a second half rebound in our performance and profitability."

The co-op this morning announced a net profit after tax of $506 million for the financial year ended July 31 2015 - up 183% - after a stronger second half performance in difficult market conditions.

Normalised EBIT for the group was $974 million, up 94%. The ingredients business' efforts to offset low milk prices with improved margins increased ingredients normalised EBIT by 43% to $973 million. Consumer and foodservice normalised EBIT increased 216% to $408 million.

Spierings says significant progress was achieved in the consumer and foodservice strategy, especially market share in eight strategic markets - New Zealand, Australia, Sri Lanka, Malaysia, Chile, China, Brazil and Indonesia.

"With the reorganisation of Dairy Partners Americas completed, consumer and foodservice volumes were up a significant 27% to 1.7 million MT," says Spierings.

"Our Asia and Greater China consumer and foodservices businesses, which source most of their milk from New Zealand, were also important contributors to this result."

In the 2015 financial year, investments in capacity and maintenance in New Zealand included: the $167 million to complete the Pahiatua dryer and distribution centre; $132 million in the anhydrous milk fat, milk protein concentrate and reverse osmosis plants at Edendale; and the $122 million investment in the dryer at Lichfield due for commissioning in 2016. Combined they represent 8.2 million litres additional capacity.

"Our new plants stand out in terms of efficiency gains and a more flexible product mix. In the second half we optimised our product mix, favouring products where we could secure higher prices, such as cheese and casein, to capture shifts in customer demand," says Spierings.

"Our $230 million investment in the past two years on capacity to support our consumer and foodservice performance is generating the volume and value growth we want, especially in Asian markets."

More like this

Farmers' call

OPINION: Fonterra's $4.22 billion consumer business sale to Lactalis is ruffling a few feathers outside the dairy industry.

Wasted energy

OPINION: Finance Minister Nicola Willis could have saved her staff and MBIE time and effort over ‘buttergate’ recently by not playing politics with butter prices in the first place.

Featured

Dr Mike Joy says sorry, escapes censure

Academic Dr Mike Joy and his employer, Victoria University of Wellington have apologised for his comments suggesting that dairy industry CEOs should be hanged for contributing towards nitrate poisoning of waterways.

People-first philosophy pays off

The team meeting at the Culverden Hotel was relaxed and open, despite being in the middle of calving when stress levels are at peak levels, especially in bitterly cold and wet conditions like today.

Farmer anger over Joy's social media post

A comment by outspoken academic Dr Mike Joy suggesting that dairy industry leaders should be hanged for nitrate contamination of drinking/groundwater has enraged farmers.

From Nelson to Dairy Research: Amy Toughey’s Journey

Driven by a lifelong passion for animals, Amy Toughey's journey from juggling three jobs with full-time study to working on cutting-edge dairy research trials shows what happens when hard work meets opportunity - and she's only just getting started.

National

Machinery & Products

JDLink Boost for NZ farms

Connectivity is widely recognised as one of the biggest challenges facing farmers, but it is now being overcome through the…

New generation Defender HD11

The all-new 2026 Can-Am Defender HD11 looks likely to raise the bar in the highly competitive side-by-side category.

» Latest Print Issues Online

Milking It

Buttery prize

OPINION: Westland Milk may have won the contract to supply butter to Costco NZ but Open Country Dairy is having…

Gene Bill rumours

OPINION: The Gene Technology Bill has divided the farming community with strong arguments on both the pros and cons of…

» Connect with Dairy News

» eNewsletter

Subscribe to our weekly newsletter